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TMI Blog2012 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of the Notification No.8/97-CE, dated 1.3.1997. It is the correctness or otherwise of the said finding and conclusion reached by the Tribunal, is the subject matter of this appeal. 2. The core issue that falls for our consideration and decision is: whether the finished goods manufactured by the 100% Export Oriented Unit ('the EOU' for short) out of the raw material supplied by another 100% EOU, and subsequently, cleared in the Domestic Tariff Area (for short "the DTA") in accordance with the EXIM Policy 1997-2002 are entitled to the benefit of the exemption provided under the Notification No.8/97-CE, dated 1.3.1997. In the alternative, whether the adjudicating authority is justified in holding that the assessee cannot take the benefit of the Notification No.8/97-CE, dated 1.3.1997 and the assessee, at the most, can take benefit of the Notification No.2/95-CE, dated 4.1.1995. 3. Brief facts, as noticed by the adjudicating authority may be stated: M/s. Favourite Industries, respondent herein, is engaged in the manufacture of processed Polyester Grey Man Made fabric, falling under chapter subheading 5407.51 of the Customs Tariff Act, 1975 and chapter sub-heading 540 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No.2/95-CE, dated 4.1.1995 and, thereby, the duty amounting to Rs. 4 ,33,00,961 /- has been short paid and the same requires to be recovered by invoking the provisions of Section 11A (1) read with Section 11A (2) of the Central Excise Act, 1944 (for short "the Act") and also for penal action under Rule 173Q (1) of the Rules. 7. In view of the aforesaid material/charges the adjudicating authority had issued the Show Cause Notices to the assessee, inter alia, directing the assessee to show cause as to why the duty of excise amounting to Rs. 4 ,33,00,961 /- should not be demanded and recovered under Section 11A(1) read with Section 11A (2) of the Act. Alternatively, to recover interest on the short duty payment by invoking the provisions under Section 11AB of the Central Excise Act and to take appropriate penal action as provided under Rule 173 Q (1) of the Rules, read with Section 11AC of the Act. Along with the notice, the adjudicating authority had enclosed Annexures A, B and C working out the details of the short payment of duty during the period in question. 8. After receipt of the show cause notices, the assessee had filed its reply dated 18.6.2002. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E, the assessee must purchase the raw material manufactured in an industrial unit in a domestic area and if such raw material is used for production or manufacture of goods and sold in the domestic area as provided in the EXIM Policy, then only, it could take the benefit of the Notification No.8/97-CE. In the alternative, the learned counsel would submit that the assessee in the present case has purchased the raw material/finished products from a 100% EOU for its manufacturing activity for the manufacture of a finished product and in the hands of the purchaser industrial unit, the transaction would be a deemed import and the finished goods in question would be made out of imported raw material/finished product and, therefore, the assessee cannot take the benefit of the Notification no.8/97-CE. Learned counsel would further submit that, if for any reason, the notification is made applicable to the respondent-industrial unit, the said unit would receive total or undue advantage in payment of the concessional rate of duty on the finished goods, which are even made out of imported raw materials/goods. The learned counsel fairly submits that there are no decisions on the issue in vogue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v. Wood Papers Ltd. and Mangalore Chemicals and Fertilisers Ltd. v. Dy. Commr. of Commercial Taxes to which reference has been made earlier.)" 17. In G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftware manufactured in the case of a Software Technology Parks (STP) unit, from so much of the duty of excise leviable thereon under Section 3 of said Central Excise and Salt Act as in excess of the amount calculated at the rate of fifty percent of each of the duties of customs, which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962) read with any other notification for the time being in force issued under sub-section (1) of Section 25 of the said Customs Acton the like goods produced or manufactured outside India if imported into India; Provided that the amount of duty payable in accordance with this notification in respect of the said goods shall not be less than the duty of excise leviable on the like goods produced or manufactured outside the hundred per cent export oriented undertaking or free trade zone or Electronic Hardware Technology Park (EHTP) unit or Software Technology Parks (STP) unit which is specified in the said Schedule, read with any other relevant notification issued under sub-rule (1) of rule 8 of the Central Excise Rules, 1944, or sub-section (1) of section 5A of the said Central Excise Act: Provided further that nothing contained in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b), (d) and (h) of paragraph 6.8 or of paragraph 6.20 of the Export and Import Policy, 1st April, 2002 - 31st March, 2007, from so much of the duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 (1 of 1944), as is in excess of an amount equal to the aggregate of the duties of excise leviable under the said section 3 of the Central Excise Act or under any other law for the time being in force on like goods, produced or manufactured in India other than in a hundred per cent export oriented undertaking or a free trade zone, if sold in India. Provided that nothing contained in this notification shall apply where such finished products, if manufactured and cleared by a unit other than a hundred per cent export-oriented undertaking or a unit in a free trade zone, are wholly exempt from the duties of excise or are chargeable to Nil rate of duty. [Notification No.8/97- CE, dated 1-3-1997 as amended by Notification No.21/97-CE, dated 11.4.1997; No.7/98-CE, dated 2.6.1998 and No.11/2000-CE, dated 1.3.2000) 19. The relevant clauses for our purpose in the EXIM Policy 1997-2002 are 9.9, 9.10, 9.13(a), 9.16 (c) and 9.20. They read as under: "DTA Sales 9.9 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign missions/diplomats provided they are entitled for duty free imports of such items in terms of general exemption notification issued by Ministry of Finance. Entitlement For Supplies From The DTA 9.13 a. Supplies from the DTA to EOU/EPZ/EHTP/ STP units will be regarded as "deemed exports" and, besides being eligible for the relevant entitlements under paragraph 10.3 of this Policy, will be eligible for the following: i. Reimbursement of Central Sales Tax; ii. Exemption from payment of Central Excise Duty on capital goods, components and raw materials; and iii. Discharge of EP, if any, on the supplier. Inter Unit Transfer 9.16 a) Transfer of manufactured goods from one EOU/EPZ/ EHTP/STP unit to another EOU/EPZ/EHTP/STP unit will be allowed. b) Goods imported/procured by an EOU/EPZ/ EHTP/STP unit may be transferred or given on loan to another EOU/EPZ/EHTP/STP unit which shall be duly accounted for, but not counted towards discharge of export performance. Disposal Of Scrap/ Waste/ Remnants 9.20 Scrap/waste/remnants arising out of production process or in connection therewith may be sold or disposed of in the DTA on payment of applicable duties or export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise duty. The Notification also speaks of compliance of two conditions by an industrial unit for taking benefits/advantage of the Notification. Firstly, the finished goods must be produced or manufactured in a 100% EOU or FTA from the raw material produced or manufactured in India (emphasis supplied). The second condition is that the goods must have been allowed to be sold in India as per sub paras (a), (b), ( c ) , (d) and (f) of para 9.9 or para 9.20 of the EXIM Policy 1997-2002. 22. Clause 9 of the EXIM Policy 1997-2002 speaks of DTA sales. Clauses (a), (b), (c), (d) and (f) put certain conditions to be complied with by a 100% EOU/FTA etc. for effecting its sales in DTA area. Clause 9.3 provides for benefits for supplies made from the DTA Area. Clause 9.16(c) in particular provides for inter unit transfers. Clause 9.20 provides for disposal of the scrap in the DTA area by a 100% EOU. 23. After having the bird's eye view of the two Notifications, namely, Notification No.2/95- CE, dated 4.1.1995 and Notification No.8/97- CE, dated 1.3.1997 and the EXIM Policy 1997- 2002, let us consider the issues canvassed by the learned counsel appearing for the parties. 24. Shri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that does not mean that the object and purpose of the notification is to be lost sight of and the wording used therein ignored. Where the wording of the notification is clear and unambiguous, it has to be given effect to. Exemption cannot be denied by giving a construction not justified by the wording of the notification." 26. In Commissioner of Central Excise, Trichy v. Rukmani Pakkwell Traders, (2004) 11 SCC 801, this Court has also held: "5. ... It is settled law that exemption notifications have to be strictly construed. They must be interpreted on their own wording. Wordings of some other notification are of no benefit in construing a particular notification." 27. In Kohinoor Elastics (P) Ltd. v. Commissioner of Central Excise, Indore, (2005) 7 SCC 528, this Court has held: "7. When the wordings of the notifications are clear and unambiguous they must be given effect to. By a strained reasoning benefit cannot be given when it is clearly not available." 28. In Compack (P) Ltd. v. Commissioner of Central Excise, Vadodara, (2005) 8 SCC 300, this Court has observed thus: "20. Bhalla Enterprises laid down a proposition that notification has to be construed on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion, is not apposite. The purpose of grant of exemption is different. The object for grant of notification shall be considered in a broad based manner. The wordings used therein have to be given their natural meaning. The purpose must be allowed to be achieved . The words "all types of materials" should be construed widely." 31. Moreover, a liberal construction requires to be given to a beneficial notification. This Court in Commissioner of Customs (Preventive), Mumbai v. M. Ambalal and Company, (2011) 2 SCC 74, (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation: "16. It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. This composite rule is not stated in any particular judgment in so many w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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